PIMCO’s bond ETF is game changer: Tom Lydon

With all eyes on his performance running an actively managed exchange-traded fund, Bill Gross has changed the game with his PIMCO Total Return ETF, according to Tom Lydon, editor of the ETF Trends newsletter.

Appearing on MoneyLife with Chuck Jaffe, Lydon made PIMCO Total Return ETF
/quotes/zigman/8989199/quotes/nls/bondBOND his “ETF of the Week,” noting that the new fund has gained over $600 million in assets since its recent opening, and that it has enhanced Gross’ reputation.

“He’s been around for 30 years in a declining interest rate environment,”Lydon said. “The granddaddy, the PIMCO Total Return conventional fund
/quotes/zigman/185339PTTAX is about to have its 25th anniversary with an annualized return of over 8%. Just incredible performance. The big question is can [Gross] bring that kind of performance with active management to the ETF space, and all eyes are on him now and so far out of the gate, he’s doing a great job.”

In fact, the ETF has actually outperformed the conventional fund it is based on, which Lydon said is most likely the result of Gross having more flexibility with the small fund, and possibly because – unlike the traditional fund — actively managed ETFs can’t use derivative securities.

“If [Gross] continues to be successful and garner assets, you will not only see other active fixed income [managers] enter the [ETF] space, but also active equity managers,” Lydon said.

Story Conversation

About The Tell

The Tell is MarketWatch’s fast and engaging look at trends and themes in the day’s markets. Drawing on our reporters, analysts and commentators around the world, as well as selecting the best of the rest online, The Tell is all about the pulse of the markets through news, insight and strategic information to help you make the best investing decisions. Got a tip? Tell us at TheTell@MarketWatch.com